Question

Fred's Canned Corn Emporium - A purveyor of the finest canned corn in Manhattan, KS for over 25 years. Read through the following narrative of Fred's activities. Answer the following questions and fill out the attached Inventory card along the way. At the beginning of the year, Fred has 25 cans of corn on hand that cost him $5 per can. On January 5, Fred purchases 20 cans of corn from lowa's Best Corn for $5.50 per can. The freight cost to get the corn from lowa to Fred's store was $10 total, and shipping terms were FOB lowa. The order shows up at the store the next day, and it takes the stock boy 1 hour to stock the new order on the shelves (and he is paid $8 /hour). On the 8", Fred sells 20 cans at $10 apiece on open account. On the 9", Fred sells 18 cans at $10 apiece for cash. On January 10, Fred buys 25 more cans from lowa's Best for $7 per can. The freight cost to get the corn from lowa to Fred's store was $10 total, and shipping terms were FOB Manhattan. The order shows up the next day, and it takes the stock boy 1 hour to stock the new order on the shelves. On the 12", Fred sells 12 cans at $10 apiece on open account. Nothing else happens in the month of January for Fred's Canned Corn Emporium. 1. For the January 5"event, what costs are inventoriable? What will be the cost per can? Record it on the inventory card provided. The Cornis inventoriable The cost is $6.40 2. Assume we are in a time of rising corn prices. We want to use the cost flow assumption that will give us the lowest cost of goods sold and the highest net income. What cost flow assumption should we use? fifo 3. We will be using Perpetual UFO or FIFO (depending on your answer from 12) because that is what we have learned in class. In reality, depending on what the nature of our product is, would we use perpetual or periodic? Periodic 4. Using the inventory card to find COGS, what journal entries should be made to record the January gih sale? 5. Using the inventory card to find COGS, what journal entries should be made to record the January 9 sale?

Answer 1

Corn Inventory Card (Using FIFO Method) :-

Anstverk -Corn Inventory Card for FIFO Method & Inventory Balance Date Inventory Transaction units I'Inp I total 25 کرلیا 25 S 206.4 125 128 lo sis 25 128 6.4 7 6.4 44.8 83.2 7 6.4 94.8 1 20 17.72 154.4 38.6 = TT vs Puschose ee 6.41128 _I I . '18 Salsero/20 o 20 s 19 Salusele 18 70 Perchosen les 17:22 193 25 7.72193 2 912 Saleslie 12 m 7 6.4 94.8 S 7.72 Cost of Grool. = 446 / Total Cogs = 291.6 Inv. Bel. al isuu cost of ruschase an is a - Purchase Price wat + freight Cast & Wages. (Qoxs.s) + 10 + 8 - 128 Tex wanit cost. 128/20 Goy Pen unit Cost of "wrchase, an vier - z 2587 7 10 +8 = 193 E eu unit Colf & 193/25 - 7.72 n unit Available for sale CITIT pt